Collateral is property securing a loan or other obligation. When a borrower makes an agreement with a lender that money loaned to the borrower will be secured by collateral, the agreement may encompass an understanding as to how the collateral may used by the lender. In some settings, such an understanding is known as a “declaration of purpose.”
A declaration of purpose determines the scope or extent to which a collateral agreement can be used for securing a set of receivables. A declaration of purpose may be global or specific. A global declaration of purpose secures a set of current and future receivables based on a list of arbitrary criteria. A specific declaration of purpose secures a set of current receivables that can be specifically identified (for example, by account number). Thus, a difference between a global declaration of purpose and a specific declaration of purpose is that a global declaration of purpose includes a prospective element: i.e., it may define arbitrary criteria to be applied to receivables not yet existing.
As noted above, a collateral agreement described by a declaration of purpose secures a “receivable.” A receivable is a generalization or abstraction of a lender's risk based on a transaction with a borrower. A receivable could correspond, for example, to a loan, or to any transaction which creates a credit risk for a lender (e.g., a bank).
An electronic form of a collateral agreement and associated declaration of purpose may be implemented by means of computers and software. In such implementations, the collateral agreement and associated declaration of purpose may, for example, be created using a user interface comprising a display device and input devices such as a keyboard and mouse, and the associated software. Such systems may model the collateral agreement and associated declaration of purpose, and related information, in records stored electronically on a machine-readable medium such as disk, subsequently retrieved, modified and stored again as is well known in connection with electronic records.
FIG. 1 shows, among other things, a collateral agreement 100 and an associated global declaration of purpose 102. Past approaches (represented in FIG. 1) to computerized implementation of such information have correlated receivables (e.g., receivables 1, 2) secured by a collateral agreement (e.g. agreement 100) with the collateral agreement in terms of borrower information 101. FIG. 1 further illustrates that a specific declaration of purpose 103 associates a specific collateral agreement (e.g. agreement 100) with a specific receivable (e.g., receivable 3) secured by the collateral agreement. Using an arrangement as shown in FIG. 1, information concerning the documents involved might be retrieved, and viewed, updated or otherwise processed for various business purposes.
However, disadvantages exist in the above-described arrangement. For example, it may be seen in FIG. 1 that there is no direct logical association or link made between the collateral agreement 100 and the receivables (e.g., receivables 1, 2, 3) that may be secured by the collateral agreement. The absence of such a linkage between collateral agreements and receivables generally means that determination of which receivables are associated with which collateral agreement can be troublesome. As noted, receivables are only correlated with a collateral agreement indirectly in terms of borrower information. Thus, to determine which receivables are associated with which collateral agreement, it might be necessary to determine based on the borrower information which receivables are associated with the borrower, and when this is determined, to derive from this information which receivables are associated with which collateral agreement. The complications associated with such operations can present administrative difficulties in business matters involving collateral agreements. Loan disbursement, and regulatory and balance sheet reporting, for example, can be made more burdensome.